Significant pension reforms urged in emerging Europe and Central Asia
Countries have a variety of options to ease the pressure on their pension systems, and a key factor is to rethink the social norms around retirement age, according to a new World Bank report entitled "The Inverting Pyramid: Pension Systems Facing Demographic Challenges in Europe and Central Asia." Why is it important to focus on retirement age? Pension systems have evolved over the years. They have become more generous and helped reduce poverty rates among the elderly - from the first German system where pensioners were older than 70, to the systems today that allow people in good health to retire even younger than 55 in some cases, after 30 years of work, While life expectancy has increased, effective retirement ages have remained constant or declined in some cases, leading to an increase in the duration of retirement - on average, men spend about 18 years in retirement today, while women spend 23.5 years. This means that many healthy adults collect pensions for extended periods of time, turning these benefits into income that is sometimes close to what they earned while still employed. But these benefits were made possible by the growing number of contributors in the past that made the systems flush with revenue, which in turn was spent in making benefits more generous. Now that the number of contributors is falling, such generous benefits are no longer affordable. Today, pension systems for many ECA countries make up the largest expenditure in their budgets. While many countries are already reforming their pension systems, more has to be done to overhaul the systems in a sustainable manner while preserving their objective of protecting the future generations, especially the elderly poor, according to the report, the WB pres service reports. Details also here
